BUILDING ON THE BACK OF SUBURBAN COMMERCIAL PROPERTY DEMAND

Written on the 26 March 2012

BUILDING ON THE BACK OF SUBURBAN COMMERCIAL PROPERTY DEMAND

A CBD property trust group has made big investments in the Queensland property market, seeking positive returns in the 2012 financial year.

Cromwell Property Group (CMW) has its eye on commercial buildings outside of Brisbane’s CBD. It acquired HQ North Tower in Fortitude Valley for $186 million and the Icon Ipswich Tower for $93 million that were developed by Leighton Properties.

Managing director Paul Weightman (pictured) believes demand for suburban office space is driven by population growth in Ipswich and the State Government’s desire to decentralise and continue to grow the corridor to the west of Brisbane.

“Ipswich is an early version of the Parramatta market in Sydney. There are the same factors to enable Ipswich to grow into a strong commercial property market,” he says.

“Tenants requiring a lot of floor space that cannot be accommodated in the CBD are driving growth in the Fortitude Valley. The area has good amenities, transport services and is fundamentally linked to the CBD.”

The lack of new available stock has increased demand for office space, prompting it to explore opportunities in refurbishing and upgrading buildings to asnew condition with relatively low rent rates.

The group recorded a loss after tax of $6.7 million for the half-year ending December 31, 2011 compared with a $28.9 million profit in the previous corresponding period. Weightman reveals the difference in profit was due to $10.4 million in transaction costs write-offs involved with the HQ North deal and a non-cash adjustment to the fair value of interest rate swaps totalling $27.5 million.

“It is an accounting loss; you can have a $27.5 million profit or loss depending on which way the market goes,” he says.

“However, we have gone from having a potential $24 million to a $12 million write-off.”

CMW has observed a property value growth in the Brisbane and Melbourne markets, but Sydney and Adelaide remain flat with Canberra still on the downturn.

Weightman suggests the short-term viability of Queensland commercial property investment depends on consumption from commodities and resources companies.

Earnings from property investments were up 15 per cent to $37.5 million in the first-half of FY12.

The group plans to continue building its portfolio of high-quality office assets.

“We have signalled to the market, we raised a significant amount of capital, but we are not looking at raising more to buy assets. We want to grow our portfolio organically through acquisitions and sales,” he says.

CMW has completed a two-year capital raising program to drive earnings and net tangible assets growth from capital recycling opportunities and funds management activities.

“We have been busy with a $49 million equity raising for the unlisted Ipswich City Heart Trust. We will use proceeds to improve the portfolio.”

The group manages four unlisted funds with $530 million in external assets under management. More than $900 million in capital raised to date has been absorbed by the group as part of its FY07 stapling.

It has also moved into wholesale funds management by launching Cromwell Real Estate Partners with five financial experts led by Steven Papadopoulos and Robert Percy who will work from the Sydney office.

The group will have no material debt maturities until June 2013, but generally owes $783 million to the big-four banks and a European bank that Weightman is keeping under wraps.

“We entered the GFC lowly geared and acquired assets, but still bear the legacy of having to use capital raisings to reduce debt,” he says.

----------

TOP PUBLICLY LISTED COMPANY
15.
Cromwell Property Group (CMW)
MD: Paul Weightman
Market Cap: $839m
Revenue ’11: 181.9m
Profit ’11: $88.1m
Staff: 77
Established: 1971 as White River Corporation (rebranded to Cromwell in 1998)

Read more about Brisbane’s Top 50 publicly listed companies in the annual Brisbane Business News top companies edition out now.

Comment on our Twitter page using the @BrisbaneBusines tag.


Latest News

BELLAMY'S FINDS EXPORTING BABY FORMULA INTO CHINA IS NO CHILD'S PLAY

BELLAMY'S (ASX: BAL) shares have suffered a 40 per cent drop in value today after the company hit a regulatory...

BRISBANE WATCH BRAND ADINA AIMS FOR ICONIC

ADINA watches is at a turning point in its history, 45 years after being founded by Robert 'Bob' Menzies i...

WHY YOU SHOULD CARE FOR YOUR BODY AS MUCH AS YOUR BUSINESS

ENTREPRENEURSHIP is a busy business. It can be all-consuming, but it is important not to neglect your health Y...

BULLETS BACK IN THE BUSINESS COMMUNITY

ALTHOUGH new to the current south-east Queensland sporting landscape, the Brisbane Bullets have a rich basketball ...

Related News

JB HI-FI IS THE GOOD GUY IN $870 MILLION ACQUISITION

ELECTRONICS giant JB Hi-Fi has formally completed its $870 million acquisition of home appliance chain The Good Gu...

ACCC ACTS AGAINST MERITON'S RIGGED REVIEWS

MERITON Property Services is under fire from Australia's main consumer watchdog, after it allegedly engaged in mi...

ACCC FIRES WARNING SHOT TO IVF PROVIDERS

IVF clinics have been put on notice by consumer watchdog, the Australian Competition and Consumer Commission (ACCC...

BIG W CEO QUITS AFTER 11 MONTHS

SALLY MacDonald has resigned as chief executive of BIG W ending her tenure at the helm of the struggling discount ...

Contact us

Email News Update Sign Up Contact Details

Subscribe to our mailing list

* indicates required
Email Format

PO Box 2087
Brisbane QLD 4001

LoginTell a FriendSign Up to Newsletter